Finance Minister Tito Mboweni on Wednesday told Parliament that the South African economy was projected to contract by 7.2% in 2020 due to the damage caused by coronavirus pandemic.The minister had earlier forecast annual growth of 0.9% for 2020 when he presented the 2020/21 budget in February.

“This is the largest contraction in nearly 90 years. Inflation will likely register 3% in 2020,” Mboweni said.

He noted that as a small open economy that is “reliant on exports, we have been hit hard by both the collapse in global demand and the restrictions to economic activity.”

During Wednesday’s presentation, the minister said the earlier forecast proved optimistic, given the unexpected contraction in the fourth quarter of 2019/20 financial year, which emerged after the budget was tabled in Parliament but before the onset of Covid-19.

“Covid‐19 has turned the global economy upside down. In the February budget, we expected that the global economy would expand by 3.3% in 2020.

“We now expect a global contraction of 5.2% this year. This will bring about the broadest collapse in per capita incomes since 1870,” Mboweni said.

He said throughout the world, tens of millions of workers have lost their jobs, with South Africa’s unemployment rate increasing by one percentage point, reaching 30.1% in the first three months of this year.

“This meant it was up from 29.1% in the final quarter of last year,” Mboweni said.